Glossary · Accounting & finance

Bank reconciliation: the method that ensures accuracy

6 min read · Updated on 3 July 2026

Definition Bank reconciliation involves comparing the bank statement line by line with the accounting ‘Bank’ account (512) to identify and explain every discrepancy. It is the fundamental consistency check for accounting: without regular reconciliation, the accounting balance drifts from the actual balance—and all decisions based on it (cash flow, follow-ups) become unreliable.

The full entry

The essentials in brief

Principle: every bank statement line must match a accounting entry — and vice versa.
Discrepancies are normal (unpresented cheques, in-transit transfers, unrecorded bank charges): reconciliation lists and explains them.
Frequency: monthly at minimum, weekly for active management, daily and automatic with bank sync.
It’s also fraud prevention: unknown direct debits, duplicate payments and misappropriations are detected during reconciliation — or not at all.
Open banking (PSD2) changed everything: bank sync automatically reconciles 80-95% of lines.

I The method

The 5-step method

The reconciliation statement starts with both balances (bank and accounting) on the same date and explains the difference:

Common discrepancies on the bank side (known to accounting, not yet processed by the bank):

Issued cheques not yet debited
Transfers made at month-end, executed at the start of the next month
Cheque or cash deposits still being processed

Common discrepancies on the accounting side (processed by the bank, not yet recorded):

Interest charges, bank fees, transaction commissions
Forgotten automatic direct debits (insurance, subscriptions)
Received customer transfers not yet allocated
Bills of exchange, loan repayments

Reconciliation is complete when: adjusted bank balance = adjusted accounting balance, down to the penny. Any unexplained residual discrepancy, even €12.47, must be investigated—it is often the tip of a larger error (duplicate entry, transposed digits) or, more rarely, fraud.

Gather the documents Day 0

Bank statement for the period + general ledger for account 512, both as of the same date.

Match line by line the core

Each transaction on the statement is matched with its accounting entry (and vice versa).

List the discrepancies outstanding items

Uncleared cheques, in-transit transfers, unrecorded fees—each outstanding item is dated and explained.

Post missing entries adjustments

Interest charges, direct debits, fees: accounting catches up with what the bank already knows.

Confirm balance equality to the euro

Adjusted bank balance = adjusted accounting balance. If not, keep looking.

II In practice

Frequency, automation and hidden value

The right frequency depends on volume: a micro-business with 30 transactions/month can manage with rigorous monthly reconciliation. An SME with 300+ transactions that reconciles monthly spends a painful half-day and discovers anomalies 4 weeks too late—too late to dispute a direct debit or recover a duplicate payment.

What bank synchronisation (DSP2/open banking) changes: your software connects to the bank feed and automatically matches each line to the corresponding invoice or entry. Automatic reconciliation rates range from 80% to 95% depending on label quality—only ambiguous cases require manual processing. Reconciliation shifts from a monthly chore to a 5-minute daily check.

The hidden value of daily reconciliation:

Real-time reliable cash flow: a 13-week forecast (cash flow statement) is only as good as its starting point.
Accurate reminders: chasing a customer who paid the day before is the best way to annoy them. With daily matching, this never happens.
Early fraud detection: fraudulent SEPA direct debits can be disputed without justification within 8 weeks (13 months if unauthorised). Monthly reconciliation may miss the short window; daily checks never do.

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Golden rule

An unexplained discrepancy should never be "written off" to close the reconciliation. €15 discrepancies that hide a 512/531 swap, a duplicate supplier payment or embezzlement often amount to thousands of euros discovered years later.

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III Frequently asked questions

Answers to the questions we get asked most.

Is bank reconciliation mandatory?

No text explicitly requires "bank reconciliation", but the obligation to maintain regular, accurate and true accounting records (Art. L.123-14 of the French Commercial Code) makes it indispensable in practice: it is THE control that ensures consistency between accounting and actual bank transactions. Accountants demand it at every closing, and auditors systematically check it. In short: not mandatory on paper, non-negotiable in reality.

Is automatic bank synchronisation reliable and secure?

Connections are made via ACPR-approved aggregators under DSP2 (read-only access, strong authentication, no payment initiation capability). In terms of reliability, automation reconciles what is obvious and queues the rest—it does not "guess". The real point of vigilance: periodic re-authentication (every 90 to 180 days, depending on the bank), which, if forgotten, silently interrupts the feed. Good software alerts when a bank connection expires.

What to do with a cheque issued but never debited?

A cheque is valid for 1 year and 8 days. After this period, it can no longer be cashed: contact the payee to determine if a new payment should be issued, then reverse the original entry (the liability reappears if still due). "Outstanding cheques" that linger from one reconciliation to the next for months are a hallmark of poorly managed accounting—address them at every quarterly closing, not just once a year.

The 5-step method

Frequency, automation and hidden value

What if a tool handled this for you?

Answers to the questions we get asked most.

Make Orizen better, one click is enough.